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PolarcusPareto Securities' 26th Annual Oil & Offshore Conference
Duncan Eley, CEOHans-Peter Burlid, CFO
11-12 September 2019
2
Disclaimer
This Presentation of Polarcus Limited (the “Company”) has been prepared solely for information purposes. This Presentation may not be distributed, reproduced or used without the consent of the Company.
The information contained herein does not purport to contain all information concerning the Company. No party has made any kind of independent verification of any of the information set forth herein, including any statements with respect to projections or prospects of the business or the assumptions on which such statements are based. Neither the Company nor any of its subsidiaries make any representation or warranty, express or implied, as to the accuracy, reliability or completeness of this Presentation or of the information contained herein and shall have no liability for the information contained in, or any omission from, this Presentation.
Included in this Presentation are various “forward-looking statements”, including statements regarding the intent, opinion, belief or current expectations of the Company or its management. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance and outcomes to be materially different from any future results, performance or outcomes expressed or implied by such forward-looking statements, including, among others, risks or uncertainties associated with the Company’s business, segments, development, growth management, financing, market acceptance and relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors, including lack of operating history. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document.
No information contained herein constitutes, or shall be relied upon as constituting, any advice relating to the future performance of the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements included in this Presentation.
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1 Polarcus in brief
2 Industry outlook
Agenda
4
Polarcus in brief VESSEL POSITIONS AS OF AUGUST 2019
SHARE OF ACTIVE GLOBAL FLEET*
*Source: Polarcus, share of 3D high-end seismic active global fleet
18%
Polarcus
Polarcus Alima
Far East
Polarcus Adira
Americas
Polarcus Asima
Far EastPolarcus Naila
Americas V. Tikhonov
Americas
Ivan Gubkin
Europe
Polarcus Nadia
StackedPreferred partner in a consolidated marketThree remaining global players in the marine seismic acquisition segment
Streamlined and efficient organizationFocus on cost discipline
Improving financial performanceRevenue and EBITDA showing significant improvement
Uniform fleet, working for top-tier clientsScalable operational platforms delivering innovative geophysical services
Leading environmental credentialsLowest emissions and IMO 2020 compliant
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Polarcus Naila14 Streamers
Polarcus Asima12 Streamers
Polarcus Alima12 Streamers
Polarcus Adira14 Streamers
High-end uniform seismic fleet
V. Tikhonov – Bareboat Charter
8 Streamers
Ivan Gubkin – Bareboat Charter
14 Streamers
Polarcus Nadia - Stacked
12 Streamers
Focused marine geophysical service provider
Global client interfaces
NASA OfficeHouston
EMEA OfficeLondon
HeadquartersDubai
APAC OfficeSingapore
Largest clients since inception
6
Competitors’ shift to multi-client means more acquisition clients
Preferred partner in a consolidated marketThree remaining players in the marine seismic acquisition industry
20185 vessel operators
20203 vessel operators
Vessel ownership has consolidated meaningfully
Acquisition Acquisition
Combined Combined
Multi-client Multi-client
7
A truly global playerPolarcus entered high-end 3D marine acquisition in 2009
FLEET PERFORMANCE Q2 2019
TECHNICAL
2.4% Technical downtime
EMISSIONS
CO2 = 5.5 ton/km2
NOX = 66.1 kg/km2
SOX = 2.1 kg/km2
SAFETY
TRCF = 0.6LTIF = 0.0
3.50%
0.50%
0.06%
0.06%Average sulfur content in fuel Polarcus Q2 2019
IMO 2020 Limit
Current IMO Limit
In compliance with IMO2020 regulation since 2009
Leading environmentally
• More than 200 projects completed worldwide
– Large scale 3D exploration through to complex 4D monitor surveys
8
2019’s largest 4D project complete Multi vessel operations and repeat business from a super-major
• Remote location, sea ice, oil field infrastructure, and an environmentally sensitive area
• 1,000 sq.km of 4D data acquired
• Complex, multi vessel operations
9
Significant WAZ project underway in Gulf of MexicoFirst project for a new asset light multi-client company
• Large wide azimuth project commenced in Mexico during Q3 2019
• 5,000 sq.km of data to be acquired for new asset light multi-client company
• Cirrus™ providing client real-time access to seismic data shortening the exploration cycle
10
Better Data Faster
Polarcus Cirrus™ provides near real-time access to seismic data during the acquisition phase
• Direct access to full fidelity seismic data
• Enabling project decisions to be made real time
• Onshore overview of quality control
Cirrus™ aligns with our clients’ objective to reduce the exploration cycle by:
• Bringing the client closer to seismic data sooner
• Enabling better exploration decisions to be made faster
Explore live with Polarcus Cirrus™
Integrated Acquisition Management (IAM)
Cloud Data Streaming (CDS)Priority Processing in the
Cloud (PPC)
LIVE ACCESS TO SURVEY
HIGH QUALITY SEISMIC DATA FASTER
REDUCED INTERPRETATION
TIMELINE
FASTER DECISIONS BETTER RESULTS
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Cost discipline and streamlined organization
Cost efficiency focus
Streamlined support
structure
Capital discipline
Gro
ss c
ost
of
sale
sC
AP
EX
sp
en
dG
&A
co
sts
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
• Disciplined cost management across the company
• Cost of sales reduced by ~50%
• Recognized as the industry benchmark in operational cost and efficiency
• Onshore organization reduced by ~40%
• Centralized operational, technical and corporate support
• Regionalized client-facing teams during downturn
• Disciplined and responsible CAPEX management
• Active management of streamer pool
• In-house streamer repair facility ramped up in 2018-19
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• H1 2019 segment revenue increased 50% year-on-year
– Driven by improved day rates
• H1 2019 EBITDA increased 35% year-on-year
• Largest 2019 4D project in the seismic industry completed in Q3 2019
• Increased backlog year-on-year and sequentially
• Tender levels, multi-client activity and pricing improving
Significant earnings increase in 2019 YTD
Improving financial performance
1313
1 Polarcus in brief
2 Industry outlook
Agenda
14
Global oil demandExpected to peak ~2035
0
20
40
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120
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Global oil consumption
Motor gasoline&gasoil LPG Naphtha
Jet and kerosene Residual fuel oil Other products
Source: IEA, OICA, ABG Sundal Collier
Global oil consumption Comments
• Non-vehicle related oil consumption expected to continue growing
• Motor gasoline and gasoil demand could peak ~2030
15
100
75
17
25
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15 19
0
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40
60
80
100
120
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Current demand 2025 2040
$2.5$2.8
$3.0$3.3
$3.6
--
1
2
3
4
$5
2016 2017 2018 2019E 2020E
• Energy gap looming through 2030 based on current projections
• Renewed focus on offshore by a number of oil majors
• Supported by discussions with clients on expected 2019-2020 activity levels
• Significant value in reducing timelines to hydrocarbon production
Underlying fundamentals support growth in marine seismicMarine seismic spending growth expected to continue as global hydrocarbon demand increases and existing inventories deplete
Global Hydrocarbon Demand Growth
MMBoepd
Currently producing assets (current demand)
Discoveries required to offset depletion of current production
Discoveries required to meet expected hydrocarbon demand growth
Marine Seismic Spend: 2016-2020E
~17% increase in offshore seismic spending expected in 2020 over 2018
USD in billions
Sources: ExxonMobil 2018 Outlook for energy,
E&P industry commentary, Broker research
16
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Marine acquisition demand improving
• Solid proprietary tender demand in H1 2019
• Healthy opportunity pipeline for Q4/Q1
• Larger exploration surveys by E&P companies driving proprietary tenders
• In addition, large scale multi-client activity particularly in southern hemisphere
Solid demand indicated by E&P company tenders and increasing leads from MC companies (without vessels)
Volume of sqkm (rolling 6 months)
Proprietary Invitation to Tenders Only
(sq.km)
* tenders received from 1 April 2019 to end August 2019
*
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Marine acquisition supply has reduced significantly
Global 3D vessels
5 4
3 6
88
44
62
3630
24
4
5
31
2014 2015 2016 2017 2018 2019 Withstreamers
withoutstreamers
Potentialfleet
CGG SGS PGS PLCS
Comments
• 22 active vessels in 2019 compared to >60 prior to the downturn
• Highly consolidated supply picture three global vessel operators (post SGS/CGG)
• Limited additional capacity readily available with streamers (~4 vessels)
• Limited additional vessels with attractive age & capacity profiles: stacked with no streamers (~5 vessels)
Limited vessel capacity can be reactivated without significant seismic equipment investment
Source: Company research
18
Marine seismic acquisition industry poised for rebound Polarcus: a clean fit with the evolving industry landscape
Industry consolidating
Client base growing
• Reduced marine acquisition competitors
• Market share re-distribution
• Re-shaping of the industry ongoing
• More multi-client companies (with no vessels)
• Polarcus focus on marine acquisition excellence
• Targeting collaboration and partnerships
E&P spend increasing
• Supported by oil price in the range of USD 55 to 70
• E&P clients' tender activity increasing
• Focus on offshore exploration investment
• Multi-client company activity growing
Fundamentals improving
• Energy gap projected through 2030
• Hydrocarbons will play a key role
• E&P company focus on building and developing hydrocarbon reserves
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2020
Q&AAppendices
21
Innovation: hybrid projects optimizing producing fieldsExplore More
Polarcus first hybrid project (with towed streamer and node operations) completed in May 2019
• Complex project environment
– Shallow water
– Five active fields and over 70 platforms
– Working with third-party node provider
• 1,200 sq.km of UHD XArray™ penta-source data
• 45 sq.km of node data
• Total of five vessels in operation
22
Innovation: XArray™XArray™ methodology has disrupted the acquisition industry since 2016
Data quality optimization Improved efficiency Reduced in-sea equipment
Streamers - Conventional Dual Source 18
Streamers – XArray™ Triple Source 12
*Acquired and secured backlog YTD
20172018
2019
30%
60%
70%*
XArray™(% of total sq.km acquired)
2016
60%
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Detailed debt overview
DebtOutstanding
30 June 2019Total credit line Maturity Interest
USD Unsecured Bond – PLCS02 USD 13.1m Jan-25 5% PIK
NOK Unsecured Bond – PLCS03 NOK 53.5m USD 6.2m Jan-25 5% PIK
Convertible bond – Tranche A USD 64.4m Jul-22 5.60%
Convertible bond – Tranche B USD 3.5m Jan-25 5% PIK
Fleet Bank Facility USD 241.4m Aug-22 to Jun-24
New Fleet Facility USD 75.0m Dec-24
Swap Facility USD 5.7m Jun-21 LIBOR + 4%
Working Capital Facility - USD 40m Jun-22 LIBOR + 4%
Gross debt USD 409.3m
Own PLCS02 bonds held USD 3.3m
Outstanding debt USD 406.0m
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Experienced Board and Management
Board of directors Executive management
Michael ManneringChairmanExtensive experience inthe oil service industry from Schlumberger and SongaOffshore
Nicholas Smith7 years as Chairman of Ophir Energy plc
Peter Zickerman20 years experience in the seismic industry
Tom Henning Slethei20 years experience as an investor in the stock and bond market
Karen El-Tawil 30 years of experience inthe seismic industry
Erik M MathiesenExtensive experience in Investment and asset management in the energy sector
Duncan EleyCEO20 years of experience in the seismic industry
Hans-Peter BurlidCFO15 years of experience in the seismic industry
Caleb RaywoodGeneral Counsel20 years of commercial law experience
Tamzin SteelSVP People & Business Services15 years’ experience working in global multinational companies in the oil & gas industry
Lars OestergaardCOO
12 years of experience in
the global oilfield services
industry.
Monish Sahni30 years’ experience in banking including the maritime and offshore sector
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